Deutsche Bank, Germany's largest bank, said its net profits fell by 50% in the second quarter, dragged lower by expenses for lawsuits against the company and by higher taxes.

Net profit for the quarter fell to €335m from €666m a year ago and the bank said it was setting aside €630m to cover lawsuit losses.

Deutsche Bank faces legal challenges related to US mortgage bonds and a scandal over rigging of a key interest rate benchmark by a number of banks. Its legal provisions have now reached €3 billion.

It also saw its effective tax rate jump to 58% from 31% a year ago. It paid €457m in taxes compared to €301m the same time last year. 

The reason was that the bank had expenses - such as the litigation costs - that are not tax deductible.

The bank said today that it was making progress in strengthening its finances to meet new regulatory demands and hold down costs. It also saw revenue from trading stocks jump by 55% to €787m.

Trading in bonds and other products brought in 11% less revenue at €1.9 billion during the quarter, which saw turmoil on bond markets due to indications from the US Federal Reserve that it could begin scaling back its bond purchases.

Co-chief executives Anshu Jain and Juergen Fitschen said in a statement that "our core business performed well" and that "our franchise remained strong" during the period.